* European, U.S. shares fall modestly
* Euro weaker against dollar, oil prices up in choppy trade
* Bank of England cuts growth outlook, no hint of future action (Adds details, quote, updates prices)
By Leah Schnurr
NEW YORK, Aug 8 (Reuters) - A three-day rally in world equity markets faded o n W ednesday, with shares trading little changed, while the euro fell as doubts grew on the prospects for early central bank action to bolster the global economy and tackle the euro zone debt crisis.
Risky assets began rising on Friday after U.S. jobs data eased concerns about global growth but supported hopes of further policy easing by the Federal Reserve. Last week’s signal by European Central Bank President Mario Draghi that it may ease borrowing costs for Spain and Italy provided further optimism.
But the Bank of England on Wednesday gave no hint of future action despite slashing its growth forecast, prompting investors to shed riskier assets such as stocks.
The uncertain direction for fiscal policy pushed Wall Street stocks modestly lower in early trading, while European shares backed off from more than four-month highs.
“We’re certainly skeptical about the ability of the authorities to really make big changes in the euro zone landscape,” said Richard Batty, strategist at Standard Life Investments.
“I think this is just one of those days where the market is coming more round to a more skeptical view of whether they can achieve what they need to achieve given how poor these economies are, and how difficult it is to make the fiscal and structural adjustments to make them more competitive.”
The UK central bank said it did not expect Britain’s recession-hit economy to show much growth at all this year despite all its efforts to pump in cash, but it remained equivocal on whether further measures were likely.
Investors had hoped the Bank of England would point to an easing in policy later in the year as the gloomy contents of its quarterly economic outlook had been widely anticipated.
In a further sign of Europe’s worsening economic conditions, France’s central bank said the French economy was likely to slip into a shallow recession in the third quarter.
The Chinese central bank is next to face the spotlight, with a batch of economic data due o n T hursday likely to draw attention to the nation’s cooling growth rate.
The FTSEurofirst 300 index of top European shares was off 0.05 percent. European shares had gained since Draghi first signaled a more interventionist stance to defend the euro two weeks ago.
The Dow Jones industrial average slipped 7.84 points, or 0.06 percent, at 13,160.80. The Standard & Poor’s 500 Index was down 1.85 points, or 0.13 percent, at 1,399.50. The Nasdaq Composite Index was down 9.99 points, or 0.33 percent, at 3,005.87.
“We’ve had a pretty good run,” said Lazard Capital Markets Managing Director Art Hogan. “We’re in a position in the market now where there are no clear catalysts and yet we’ve been inching higher. The market seems to be finding its path of least resistance.”
Standard Chartered Bank, under fire from accusations it violated U.S. laws by hiding $250 billion in transactions tied to Iran, clawed back some of its huge losses and was up more than 8 percent. The British bank’s shares dived 16.4 percent on T ues day on hefty volume.
The bank’s top executives were working on its defense strategy o n W ednesday, having already contested the regulator’s figures.
MSCI’s world equity index weakened 0.1 percent for its first down day this week.
In early New York trading, the euro was down 0.5 percent at $1.2363, turning lower after gains that took it to a one-month high of $1.2443 on Monday.
Investors were looking for more details of the ECB’s latest proposal to tackle the three year-old debt crisis that has threatened the survival of the 17-nation currency bloc.
Draghi has said the bank may buy the short-term bonds of euro zone nations battling with rising yields on their debt, but that any action had to be in conjunction with the euro zone’s bailout funds and under strict conditions.
In the debt market, Germany’s sale of 3.4 billion euros of 10-year government bonds attracted more demand than a similar auction last month, indicating investors’ appetite for safe haven assets has not diminished much since Draghi’s statements.
Ten-year Spanish government bond yields briefly touched the 7 percent level - beyond which funding costs are perceived to be unaffordable in the long run - on the growing view that it may take time until Spain asks for a bailout.
The benchmark 10-year U.S. Treasury note was down 1/32, the yield at 1.63 percent.
Oil prices were choppy, with Brent crude futures for September up 52 cents to $112.52 a barrel, while U.S. crude gained 30 cents at $93.97. (Additional reporting by Richard Hubbard and Tricia Wright in London and Rodrigo Campos in New York; Editing by Dan Grebler)